Post Holdings sees Q4 growth, plans IPO for nutrition segment

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Dive Brief:

Post Holdings' fourth quarter net sales reached $1.6 billion boosted by growth in its refrigerated foods segment, an increase of 12.5% from this time last year, according to the company's most recent earnings report. This was right on par with analyst expectations that pegged net sales at $1.6 billion.

The company's gross profit was $478 million this quarter, an increase of $40.9 million compared to the year before. But Post also reported a Q4 loss of $15.6 million, compared to a profit of $8 million last year, which was hurt by the company's newly acquired Weetabix business.

In the earnings release, the company also announced that it is planning to pursue an initial public offering for its Active Nutrition business segment, including PowerBar and Joint Juice brands. Post plans to sell about 20% of the ownership of the new public company and it is expected to be completed in the second half of fiscal year 2019.

Dive Insight:

Post Holdings has made a lot of changes to show that it makes more than just cereal, and those moves have been successful. In fact, the growth in sales this quarter was mainly led by its refrigerated foods, which is now the company’s largest segment. In that category, net sales were $614.2 million for the fourth quarter, an increase of 29.3% compared to last year.

The brands Post is known for — ready-to-eat cereals — performed only slightly better than this time last year. Net sales for the cereal brands came to $471 million this quarter, an increase of 1.6% from last year and with a volume increase of 2.2%. That volume growth this quarter primarily came from Honey Bunches of Oats and Pebbles, which partially offset volume declines from its Malt-O-Meal bagged cereal and private label. But that decrease comes as Post has worked hard to boost the popularity of its Malt-O-Meal cereals through new packaging and grocery store displays that other manufacturers have mimicked.

But not everything negative could be offset. Expenses for fiscal year 2018 increased to $975.2 million from just $107.8 million last year. The jump can be attributed to costs related to the two major acquisitions it made last year. The company bought Bob Evans Farms for $1.53 billion and purchased U.K. cereal brand Weetabix for $2.7 billion. So even though sales increased 12.5% this quarter, Post still saw a loss of $15.6 million. Included in that loss is a $125 million in potential overpayment for its Weetabix business. Even with growth in overall sales, the business has still been hurt by weaker volumes in certain segments and changing consumer demands.

Also Thursday evening, the company announced it's spinning off its Active Nutrition segment. Dividing the company isn't that surprising since in January, Post had said it might spin off its private brands business or possibly take it public. At that time, Rob Vitale, Post's president and CEO, said the optimal way to support business "is likely outside of Post's full ownership."

The company's Active Nutrition business includes protein drinks and powders, nutrition bars and other health products under the PowerBar, Premier Protein and Joint Juice brands. This fiscal year, that unit made up about $827.5 million in sales. Overall, the net sales for the Active Nutrition business have increased at an annual rate of 30% since 2014, according to the company in a separate release. That could make it an attractive segment for an IPO.

"This transaction furthers Post’s effort to unlock value with creative structuring," Vitale said in a statement.

Since nutrition bars and functional foods do well in the market, Post shouldn't have too much difficulty raising money through an IPO. And w​ith this quarter's growth, the company seems to be both in a good place for this IPO and to look out for other brands in the sector that it might acquire. Post said in the release that it is in a position to be "a consolidator across a wide range of opportunities."

Correction: In a previous version of this article, the CEO's first name was incorrect. It has been changed.